Well, if the economy – and not just software, mind you – is going from products to services and perforce subscriptions then vendors are going to need an appropriate billing system that chases down and captures all the monthly payments, right?
Well, that’s what a couple of lads out of the on-demand school thought too and that’s why they started Zuora Inc on Marc Benioff and Benchmark Capital’s combined nickel.
Yes, that Marc Benioff, the CEO of salesforce.com, the software-as-a-service pioneer, who got his initial stake from his old boss Larry Ellison.
He kicked in on Zuora’s $6.5 million A round in December and Zuora is growing up in Oracle’s shadow. Literally. When you look out its windows in Redwood City, California all you see in the looming presence of Oracle.
Zuora, lest you think the word comes from some exotic language and is fraught with meaning, is simply the combination of the last names of its founders: CEO Tien Tzuo, who in his previous life was saleforce.com’s eleventh employee reporting directly to Benioff either as the company’s chief marketing officer or chief strategy officer and was there for its rise from zero to close a billion dollars in revenues; president KV Rao, an early WebEx recruit; and CTO Cheng Zuo, who architected and implemented WebEx’ order-to-cash system, which manages the SaaS operation’s subscription lifecycle process.
According to Zuora, which only came out from underground in March and put its Z-Billing system on the market in May, conventional billing systems like SAP, Oracle, Great Plains, QuickBooks and PayPal can’t cut it in a subscription economy. They were designed for manufacturing and distribution companies. They are built for one-time transactions.
Subscription-based billing is more complicated; the price plans alone are complex and varied. Getting the goose to lay the golden egg can be painful.
Z-Billing is supposed to be easy to use with a simple interface that can be easily customized to any B2B or B2C industry and any preferences. It also integrates with a company’s existing CRM and accounting packages.
The platform – nobody just has plain garden-variety software anymore – the platform is built as an on-demand model and can reportedly support any charge model including one-time, recurring, usage, metering and volume tier pricing.
It will scale, its creators say, into the millions of users and it will handle invoices, order changes and billing disputes. It also tracks metrics like churn, renewals, MRR (monthly recurring revenue), ACV (annual contracted value) and TCV (total contracted value) and is supposed to give the company a single source for data about customers, orders, bookings, revenues and renewal rates.
Zuora charges 2% of total billings for its billing services provided the monthly charges amount to at least 500 bucks and will drop to 1% for a large $100 million firm.
Two percent is less than the 2.7% of revenues the online services industry is supposed to be spending these days on billing. Zuora also claims that lack of flexibility in pricing and packing costs companies market share, holding up AT&T as an example.
So far Zuora has collected 12 customers, Tzuo said, including Coremetrics, the web-based analytics and precision marketing software house, with 27 different pricing models to keep straight
Salesforce.com, which has been fiddling with its own billing system, a development Tzuo is credited with, has yet to come over. “It’s a prospect,” Tzuo says.
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